Question 1

What is Customer Lifetime Value (CLV) and how is it calculated?

Accepted Answer

CLV estimates the total revenue a business can expect from a single customer throughout their relationship. Simple method: CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan. Advanced method (with churn): CLV = (Average Purchase Value × Purchase Frequency) ÷ Churn Rate.

Question 2

How do I use CLV for customer acquisition?

Accepted Answer

CLV helps determine how much you can spend to acquire customers. If CLV is $100, you can spend up to $100 on acquisition and still be profitable. Generally, spend 20-30% of CLV on acquisition for sustainable growth. Our calculator helps you make these decisions.

Question 3

What's the difference between simple and advanced CLV calculation?

Accepted Answer

Simple method uses customer lifespan (how long they remain a customer). Advanced method uses churn rate (percentage of customers who stop buying). Use simple mode if you know average customer lifespan, advanced mode if you know churn rate. Both methods provide valuable insights.

Question 4

How do I calculate CLV for different customer segments?

Accepted Answer

Calculate CLV separately for each customer segment using segment-specific data: average purchase value, purchase frequency, and lifespan/churn rate. Compare CLV across segments to identify high-value groups and focus marketing on those segments.

Question 5

How often should I recalculate CLV?

Accepted Answer

Recalculate CLV quarterly or when business conditions change significantly. Changes in pricing, product mix, customer behavior, or retention rates affect CLV. Regular recalculation ensures your marketing budgets and strategies remain aligned with actual customer value.

CLV Calculator - Customer Lifetime Value

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